Blockchain Association urges lawmakers to vote for Sen. Ted Cruz's measure to repeal controversial tax rule

The Blockchain Association is calling on Congressional leadership to vote for a legislative measure to overturn a controversial tax rule finalized late last year that requires certain decentralized finance brokers to file reports on gross proceeds.

The industry group, with 75 members such as Coinbase, Kraken and Uniswap Labs, penned a letter to Senate Majority Leader John Thune (R-S.D.), House Speaker Mike Johnson (R-La.), Senate Minority Leader Chuck Schumer (D-N.Y.) and House Minority Leader Hakeem Jeffries (D-N.Y.) on Wednesday asking them to vote to repeal that rule calling it "misguided."

"The DeFi broker rule, finalized in the waning days of the Biden administration, represents regulatory overreach that fundamentally misunderstands the technology it attempts to regulate and ignores Congress’s intent," the Blockchain Association said in the letter.

The group's letter comes after Sen. Ted Cruz (R-Texas) introduced a legislative measure aimed at overturning the rule last month.

The U.S. Internal Revenue Service finalized the rule in late December that requires "DeFi brokers" to act like traditional securities brokers who are required to collect information about their users' trades. Some "decentralized finance industry participants" will have to send their customers Form 1099 tax returns, which are used to report payments that typically aren't from an employer, like gambling winnings, rents and royalties.

The U.S. Treasury Department had also noted that the finalized rule applies to "front-end service providers" that interact "directly with customers," which suggests entities that run the primary website used to access a decentralized protocol, rather than the protocol itself. The rule is expected to go into effect on or after Jan. 1, 2027.

The rule caught criticism quickly from the crypto industry who say crypto is different from traditional assets and that the rule "misclassifies technology infrastructure as intermediaries." The Blockchain Association also swiftly sued the IRS challenging the rule.

"Under the rule, software companies that never take custody or control of users’ assets will be required to radically rebuild their services in order to unnecessarily collect and then report to the government the personal identifying information and transaction details of potentially tens of millions of American users," the Blockchain Association said in its letter on Wednesday.

Cruz accused the rule of trying to "infringe on both the privacy and security of Americans," while also discouraging innovation in the U.S. when he proposed his Congressional Review Act resolution last month.

Next week, members of the Blockchain Association will meet in Washington to speak with lawmakers' offices about Cruz's resolution, according to a statement.